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May 26, 2019

Retail News Originally Published on May 24, 2019 | Sears pins its future on small stores selling appliances, mattresses. Here's what that looks like

Lauren Thomas

10-12 minutes

The
grand opening of the new Sears Home & Life store in Lafayette,
Louisiana. Two other Sears Home & Life stores are also opening in
Anchorage, Alaska, and Overland Park, Kansas.
Source: Sears

Like
many suburban shopping areas, Overland Park, Kansas, has a Whole Foods
grocery store and a Cheesecake Factory. Now, it’s among the first to
have a Sears Home & Life store.
For five decades, from 1967 to 2017, Sears had presence in the booming town, which is also home to Sprint’s headquarters.
But
the Sears department store and auto center at 9701 Metcalf Ave. went
dark two years ago, to make way for a glitzy mixed-use development. This
is the narrative many people associate with Sears these days: store
closings and liquidation sales. But a shiny, new Sears Home & Life
store is the tale the company wants people talking about as it looks for
a fresh start after narrowly escaping liquidation.
Sears on
Friday is opening its first such smaller-format stores — selling mainly
mattresses, appliances and connected home products — in Overland Park
and in Anchorage, Alaska, and in Lafayette, Louisiana. The company hopes
these areas will draw new customers and nostalgic ones who shopped at
now-shuttered Sears department stores in those neighborhoods and want
the once-bankrupted brand back.

Sears is taking lessons
from its storied past, with more than 125 years in business as an
iconic American retailer, combined with its historic strengths in
selling home goods like appliances, in hopes of creating its future. But
it will also continue to face headwinds — like tariffs on consumer
goods — and trendy, digitally native brands — like furniture retailer Wayfair and mattress-maker Casper — encroaching on its turf.
“We are looking for alternative ways to build our business,” Peter
Boutros, chief brand officer for Sears and Kmart, and president of
Kenmore, Craftsman and DieHard, said ahead of the Overland Park grand
opening. “The brand has so much equity, ... even with what we’ve been
through.”
Sears Holdings, which owned Sears and Kmart, filed for
bankruptcy protection in October with about 700 stores. A $5.2 billion
sale saved the company, including its Kenmore and DieHard brands, and
put everything into an entity called Transform Holdco. Transform Holdco
is controlled byESL Investments, a hedge fund owned by former Sears CEO Eddie Lampert, and has about 425 Sears and Kmart locations still operating throughout the country.
Sears Home & Life is the company’s next chapter.

The
“Welcome” Service Desk at the Sears Home & Life store where
customers can meet with experts and explore how new appliances would
look in a full-scale kitchen.
Source: Sears

“This is an evolution in response to two things in the market,” Boutros
said. “We are known for our home services, appliances and mattresses.
And the second thing is ... customers still want to shop for big-ticket
items, lay on a mattress to test it, or talk to a home service expert in
a physical store.”
The retailer said it designed the Home &
Life stores based on feedback gathered from opening a handful of
smaller-format stores selling just mattresses and appliances in 2017
in Fort Collins, Colorado, Pharr, Texas, Camp Hill, Pennsylvania, and
Honolulu. Those four stores are still open and will now be converted to
Home & Life-branded locations.
Beyond the three openings
Friday, Sears won’t say exactly how many Home & Life locations it
plans to operate. But it says it’s already scouting other real estate
across the country. And it seems to have a strategy for where it wants
these stores to be.

Young families

“We are
looking for emerging communities where young families are building
homes,” Boutros said. “Also where boomers are downsizing. ... What we
have to do with the boomers group is win back their trust, win back
their confidence — that they will come back and shop with us for all the
things we are known for.”
Overland Park, for example, is
considered one of the better suburbs to raise a family in the Kansas
City area, with highly rated public schools. It was recently rated by
neighborhood-review site Niche as the No. 1 city to buy a home in the U.S., ahead of places like Plano, Texas, and Raleigh, North Carolina.
Boutros’
team will also consider opening Home & Life shops where there are
already full-line Sears stores, if there’s ample demand from Sears’
customers. But the new Home & Life locations are just a fraction of
that size — at roughly 12,500 square feet — and are going to meet
consumers where they’re spending the most time, likely not in enclosed
shopping malls.
“Personally I think an open-air center ... for
convenience, driving up ... makes more sense for us,” he said. “We are
not as encumbered as being inside a mall. There’s more flexibility.”

Mattress
display at new Sears Home & Life store featuring top brands
including Tempur-Pedic, Beautyrest, Sealy, Serta, Simmons and Stearns
& Foster (only available in Overland Park and Lafayette).
Source: Sears

The new Home & Life stores offer mattresses from brands like Serta, Sealy and Tempur-Pedic.
They also sell small appliances like vacuums, major appliances such as
those manufactured under Sears’ Kenmore brand and connected home
products. Sears has a deal with Amazon in which some Kenmore appliances, like refrigerators, are now Alexa-enabled.
A huge focus of these stores is also service, the company said.
The
Home & Life location in Overland Park has a service desk where
shoppers can bring questions while they’re browsing. It has a “Search
Bar,” akin to Apple’s
Genius Bar, where shoppers can order anything from either Sears’ or
Kmart’s website that’s not in the store and get it delivered. It also
includes other services like curbside pickup and buy online pick up in
store.
To be sure, when compared with other advancements retailers
have been making to their bricks-and-mortar stores in recent years,
Sears’ upgrades within the Home & Life concept might not seem that
exciting.Best Buy’s
stores selling appliances have similar help-service bars with trained
tech representatives, and expanded delivery options. Same with Home Depot and Lowe’s. Even big-box chains like Walmart and Target will give Sears’ growth strategy a run for its money — they offer many of the same items, like mattresses and appliances.
The
mattress category in particular is being flooded with competition from
start-up brands like Casper, Purple, Leesa, Tuft & Needle, Eight
Sleep and Nectar, which sell directly to consumers, bypassing department
stores. Mattress Firm is shutting more than 200 locations, as online mattress sales ballooned more than 60% in 2017. Does Sears Home & Life really stand a chance?

The
Sears Home & Life store offers Smart Home and Home Services areas,
where shoppers can explore connected home products and shop replacement
parts for any appliance.
Source: Sears

“I’m glad [Lampert] is still trying to find the format that works,”
said Alan Lacy, former Sears chairman and CEO. “A point of
differentiation with Home & Life is it has the Kenmore brand. That
does still have some value, so there’s something to fight with there.”
“But a challenge is going to be the appliance category is something
people purchase from rarely,” Lacy added. “The principal competitors —
Home Depot, Lowe’s and Best Buy — all have shoppers in their stores with
more frequency.” Sears’ competitors are more “top of mind” with many
consumers in the U.S. today, he said.
Each Home Depot, Lowe’s and
Best Buy reported same-store sales gains — a closely watched measure of a
retailer’s health — during their latest fiscal quarters. Investments in
their stores and websites are paying off and clearly still driving
traffic.
Sears, by contrast, has seen its sales steadily decline. It went 42 quarters with only one three-month period of gains in same-store sales.
Its last profitable year was in 2010. In the midst of its bankruptcy
proceedings, it lost $318 million during the November-December holiday
season, according to SEC filings, though some of that was because of bankruptcy costs.

At
the Sears Home & Life store, customers can browse leading appliance
brands, including Kenmore, and assorted smart home products in kitchen
vignettes.
Source: Sears

Lessons from the past

Notably
missing from the Sears Home & Life store in Overland Park is
apparel, something Sears and Kmart locations have carried for decades. (Clothing and accessories can still be ordered at the store using the Search Bar.)
Boutros
said Sears — with Home & Life — really has to “lean into what we
are known for,” which is its DieHard tool brand, Kenmore washers and
dryers, and overall expertise in installing bulky appliances. “We’re not
trying to create new categories,” he said. “We’re not trying to create
something we’re not.”
Of course, just because Sears is putting money into its Home & Life concept doesn’t mean it will work.
Sears
less than a year ago devoted resources toward completely renovating a
store at Oakbrook Center in Illinois. It trimmed the size of the store,
added more modern fixtures and mixed up the merchandise. But seven
months after the renovations were complete, the store shut in April.
Transform Holdco said it opted not to acquire the lease of the Oakbrook store because the location wasn’t making money.

Major
appliances including Kenmore and other leading appliance brands,
displayed in kitchen vignettes at the new Sears Home & Life store.
Source: Sears

Tariffs
stemming from the U.S.-China trade war could prove to be another
headwind because some of Sears appliances, consumer electronics and
other goods are made in China.
There’s also still baggage from the bankruptcy. Sears Holdings is suing Lampert,
alleging he and other associates stripped the company of valuable
assets while Lampert was CEO. Lampert and ESL Investments have denied
doing anything wrong.
And there have been plenty of other
retailers that have emerged from Chapter 11 bankruptcy, only to fall
back on hard times. Payless ShoeSource, RadioShack and Gymoree are just a
few examples.
“People are putting Sears down, but I am out in
front to change that narrative,” Boutros said. “We are going to come out
and come back strong. What happens over a period of time ... you get to
a stage where you’ve got to right-size and refocus. Sometimes that is a
quantum leap to refocus.”

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